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KEM 2019-06-30

Part I - Financial Information

Item 1 - Financial Statements

Note 1. Basis of Financial Statement Presentation

Note 2. Debt

Note 3. Goodwill and Intangible Assets

Note 4. Restructuring Charges

Note 5. Comprehensive Income (Loss) and Accumulated Other Comprehensive Income

Note 6. Changes in Stockholders' Equity

Note 7. Equity Method Investments

Note 8. Reportable Segment and Geographic Information

Note 9. Defined Benefit Pension and Other Postretirement Benefit Plans

Note 10. Stock-Based Compensation

Note 11. Income Taxes

Note 12. Basic and Diluted Net Income per Common Share

Note 13. Derivatives

Note 14. Leases

Note 15. Concentrations of Risks

Note 16. Subsequent Events

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Item 4. Controls and Procedures

Part Ii-Other Information

Item 1. Legal Proceedings

Item 1A. Risk Factors

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Item 3. Defaults Upon Senior Securities

Item 4. Mine Safety Disclosures

Item 5. Other Information

Item 6. Exhibits

EX-31.1	kem-fy200630xex311.htm
EX-31.2	kem-fy200630xex312.htm
EX-32.1	kem-fy200630xex321.htm
EX-32.2	kem-fy200630xex322.htm

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PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements

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Note 1. Basis of Financial Statement Presentation

The Condensed Consolidated Financial Statements contained herein are unaudited and have been prepared from the books and records of KEMET Corporation and its subsidiaries (“KEMET” or the “Company”). In the opinion of management, the Condensed Consolidated Financial Statements reflect all adjustments, consisting only of normal recurring adjustments unless otherwise disclosed, necessary for a fair presentation of the results for the interim periods. The Condensed Consolidated Financial Statements have been prepared in accordance with the instructions to Form 10-Q, and therefore, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, and cash flows in conformity with U.S. generally accepted accounting principles (“GAAP”). Although the Company believes the disclosures are adequate to make the information presented not misleading, it is suggested that these Condensed Consolidated Financial Statements be read in conjunction with the audited financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended March 31, 2019 (the “Company’s 2019 Annual Report”).

The accompanying Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. In consolidation, all intercompany amounts and transactions have been eliminated. Net sales and operating results for the three months ended June 30, 2019 are not necessarily indicative of the results to be expected for the full year.

The Company’s significant accounting policies are presented in the Company’s 2019 Annual Report. Refer to the “Change in Accounting Policies” section below for changes in accounting policies since the issuance of the Company's 2019 Annual Report.

Use of Estimates and Assumptions

The preparation of financial statements in conformity with GAAP requires management to make estimates, assumptions, and judgments based on historical data and other assumptions that management believes are reasonable. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. In addition, they affect the reported amounts of revenues and expenses during the reporting period.

The Company’s judgments are based on management’s assessment as to the effect certain estimates, assumptions, or future trends or events may have on the financial condition and results of operations reported in the unaudited condensed consolidated financial statements. It is important that readers of these unaudited financial statements understand that actual results could differ from these estimates, assumptions, and judgments.

Change in Accounting Policies

Effective April 1, 2019, the Company adopted Accounting Standards Codification (“ASC”) 842, Leases (“ASC 842”) and Accounting Standards Update (“ASU”) No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing (Hosting) Arrangement that is a Service Contract (“ASU 2018-15”). As a result, the Company changed its accounting policy for leases and for implementation costs related to hosting arrangements. Except as discussed below, there have not been any other changes to the Company's significant accounting policies since the issuance of the Company's 2019 Annual Report.

Leases

ASC 842 requires the recognition of right-of-use (“ROU”) assets and lease liabilities for operating leases on the Condensed Consolidated Balance Sheets. The Company adopted ASC 842 using a modified retrospective transition approach by applying the new standard to all leases existing at the date of initial application and not restating comparative periods. The Company elected the package of practical expedients permitted under the transition guidance, which allowed the Company to not reassess whether arrangements contained leases, not reassess lease classifications, and not reassess initial direct costs. The adoption of ASC 842 did not impact beginning retained earnings, or the prior year Condensed Consolidated Statements of Operations and Cash Flows.

Under ASC 842, the Company determines if an arrangement contains a lease at inception based on whether or not the Company has the right to control the asset during the contract period and other facts and circumstances. The Company has elected to not allocate the contract consideration for operating lease contracts with lease and non-lease components, and account for the lease and non-lease components as a single lease component. Operating lease ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make

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lease payments arising from the lease, both of which are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The operating lease ROU asset also includes any lease prepayments, net of lease incentives.

Leases with a lease term of 12 months or less at inception are not recorded on the Condensed Consolidated Balance Sheets and are expensed on a straight-line basis over the lease term in the Condensed Consolidated Statements of Operations. The lease term is determined by assuming the exercise of renewal options that are reasonably certain. As most of the Company's leases do not provide an implicit interest rate, the Company uses its local incremental borrowing rate at the lease commencement date to determine the present value of lease payments. 

ROU assets and the short-term and long-term lease liabilities from operating leases are included in “Other assets,” “Accrued expenses,” and “Other non-current obligations,” respectively, in the Condensed Consolidated Balance Sheet. The Company's accounting for finance leases (formerly referred to as capital leases prior to the adoption of ASC 842) remains substantially unchanged. Finance leases are not material to the Company's Condensed Consolidated Financial Statements. Refer to Note 14, Leases, for additional information regarding the Company's leases and related transition adjustments.

Capitalized Software and Cloud-computing Arrangements

In August 2018, the FASB issued ASU No. 2018-15. The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The Company early adopted the amendment in the first quarter of fiscal year 2020 and is applying the ASU prospectively to implementation costs incurred after April 1, 2019. 

As of June 30, 2019, the Company had $2.2 million of capitalized implementation costs related to cloud-computing arrangements, net of amortization. These capitalized implementation costs are amortized on a straight-line basis over the expected terms of the hosting arrangements and are amortized in the same line item in the Consolidated Statements of Operations as the expense for fees for the associated hosting arrangements.

Significant Accounting Policies

Revenue Recognition

The Company recognizes revenue under the guidance provided in ASC 606, Revenue from Contracts with Customers (“ASC 606”). Consistent with the terms of ASC 606, the Company records revenue on product sales in the period in which the Company satisfies its performance obligation by transferring control over a product to a customer. The amount of revenue recognized reflects the consideration the Company expects to receive in exchange for transferring products to a customer. The Company has elected the practical expedient under ASC 606-10-32-18 and does not consider the effects of a financing component on the promised amount of consideration because the period between when the Company transfers a product to a customer and when the customer pays for that product is one year or less. As performance obligations are expected to be fulfilled in one year or less, the Company has elected the practical expedient under ASC 606-10-50-14 and has not disclosed information relating to remaining performance obligations.

The Company sells its products to distributors, original equipment manufacturers (“OEM”), and electronic manufacturing services providers (“EMS”), and the sales price may include adjustments for sales discounts, price adjustments, and sales allowances. The Company has elected the practical expedient under ASC 606-10-10-4 and evaluates these sales-related adjustments on a portfolio basis. The principle forms of these adjustments include:

•	Inventory price protection and ship-from stock and debit (“SFSD”) programs,

•	Distributor rights of returns,

•	Sales allowances, and

•	Limited assurance warranties

The Company's inventory price protection and SFSD programs provide authorized distributors with the flexibility to meet marketplace prices by allowing them, upon a pre-approved case-by-case basis, to adjust their purchased inventory cost to correspond with current market demand. Requests for SFSD adjustments are considered on an individual basis, require a pre-approved cost adjustment quote from their local KEMET sales representative, and apply only to a specific customer, part, specified special price amount, specified quantity, and are only valid for a specific period of time. To estimate potential SFSD adjustments corresponding with current period sales, KEMET records a sales reserve based on historical SFSD credits, distributor inventory levels, and certain accounting assumptions, all of which are reviewed quarterly.

Select distributors have the right to return a certain portion of their purchased inventory to KEMET from the previous fiscal quarter. The Company estimates future returns based on historical return patterns and records a corresponding right of

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return asset and refund liability as a component of the line items, “Inventories, net” and “Accrued expenses,” respectively, on the Condensed Consolidated Balance Sheets. The Company also offers volume based rebates on a case-by-case basis to certain customers in each of the Company’s sales channels.

The Company's sales allowances are recognized as a reduction in the line item “Net sales” on the Condensed Consolidated Statements of Operations, while the associated reserves are included in the line item “Accounts receivable, net” on the Condensed Consolidated Balance Sheets. Estimates used in determining sales allowances are subject to various factors. This includes, but is not limited to, changes in economic conditions, pricing changes, product demand, inventory levels in the supply chain, the effects of technological change, and other variables that might result in changes to the Company’s estimates.

The Company provides a limited assurance warranty on products that meet certain specifications to select customers. The warranty coverage period is generally limited to one year for United States based customers and a length of time commensurate with regulatory requirements or industry practice outside the United States. A warranty cannot be purchased by the customer separately and, as a result, product warranties are not considered to be separate performance obligations. The Company’s liability under these warranties is generally limited to a replacement of the product or refund of the purchase price of the product. Warranty costs were not material for the three months ended June 30, 2019 and 2018.

Shipping and handling costs are included in cost of sales.

Disaggregation of Revenue

Refer to Note 8, “Segment and Geographic Information” for revenue disaggregated by primary geographical market, sales channel, and major product line.

Contract liabilities

Contract liabilities consist of advance payments from certain customers within the OEM channel for the development of additional production capacity. The current and noncurrent portions of these liabilities are included as a component of the line items, “Accrued expenses” and “Other non-current obligations,” respectively, on the Condensed Consolidated Balance Sheets.

The balance of net contract liabilities consisted of the following at June 30, 2019 and March 31, 2019 (amounts in thousands):

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Contract Liabilities	Classification in Balance Sheet	June 30, 2019				March 31, 2019
Current	Accrued expenses	$	256			$	256
Non-current	Other non-current obligations	—				—
		$	256			$	256

In the three months ended June 30, 2019, the Company did not recognize any revenue related to contract liabilities at March 31, 2019. In the three months ended June 30, 2018, the Company recognized revenue of $0.1 million related to contract liabilities at March 31, 2018. Revenue related to contract liabilities is recorded on the Condensed Consolidated Statements of Operations in the line item, "Net sales."

Contract assets

The Company recognizes an asset from the costs incurred to fulfill a contract if those costs directly relate to an existing or anticipated contract or specific business opportunity, if the costs enhance resources that will be used in satisfying performance obligations in the future, and the costs are expected to be recovered through subsequent sale of product to the customer. The Company has determined that certain direct labor, materials, and allocations of overhead incurred within research and development activities meet the requirements to be capitalized. As most of the Company's contracts and customer specific business opportunities do not include a stated term, the Company amortizes these capitalized costs over the expected product life cycle, which is consistent with the estimated transfer of goods to the customer. Capitalized contract costs were $1.5 million and $1.6 million at June 30, 2019 and March 31, 2019, respectively. Capitalized contracts costs are recorded on the Condensed Consolidated Balance Sheets in the line item, “Other assets.” Amortization expense related to the contract costs was $0.2 million and $0.2 million for the three months ended June 30, 2019 and 2018, respectively. There was no impairment loss in relation to the costs capitalized for the three months ended June 30, 2019 and 2018. Amortization expense related to contract assets is recorded on the Condensed Consolidated Statements of Operations in the line item "Cost of sales."

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Fair Value Measurement

The Company utilizes three levels of inputs to measure the fair value of (a) nonfinancial assets and liabilities that are recognized or disclosed at fair value in the Company’s Condensed Consolidated Financial Statements on a recurring basis (at least annually) and (b) all financial assets and liabilities. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

The first two levels of inputs are considered observable and the last is considered unobservable. The levels of inputs are as follows:

•	Level 1—Quoted prices in active markets for identical assets or liabilities.

•	Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•	Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and liabilities measured at fair value on a recurring basis as of June 30, 2019 and March 31, 2019 are as follows (amounts in thousands):

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	Carrying Value June 30,				Fair Value June 30,				Fair Value Measurement Using												Carrying Value March 31,				Fair Value March 31,				Fair Value Measurement Using
	2019				2019				Level 1				Level 2 (3)				Level 3				2019				2019				Level 1				Level 2 (3)				Level 3
Assets (Liabilities):
Money markets (1)(2)	$	62,846			$	62,846			$	62,846			$	—			$	—			$	60,687			$	60,687			$	60,687			$	—			$	—
Derivative assets	706				706				—				706				—				5,141				5,141								5,141
Derivative liabilities	(3,145		)		(3,145		)		—				(3,145		)		—				—				—				—				—				—
Total debt	(312,096		)		(322,700		)		—				(322,700		)		—				(294,471		)		(303,170		)		—				(303,170		)		—

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⁽¹⁾ Included in the line item “Cash and cash equivalents” on the Condensed Consolidated Balance Sheets.

⁽²⁾ Certificates of Deposit of $34.1 million and $32.2 million that mature in three months or less are included within the balance as of June 30, 2019 and March 31, 2019, respectively.

⁽³⁾ Derivative assets and liabilities fair value was determined by using a third-party matrix-pricing model that uses significant inputs derived from or corroborated by observable market data. Where applicable, these models discount future cash flow amounts using market-based observable inputs, including interest rate yield curves, and forward and spot prices for currencies. For total debt, the valuation approach used to calculate fair value was a discounted cash flow based on the current market rate.

Deferred Income Taxes

The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled. The Company periodically evaluates its net deferred tax assets based on an assessment of historical performance, ability to forecast future events, and the likelihood that the Company will realize the benefits through future taxable income. Valuation allowances are recorded to reduce the net deferred tax assets to the amount that is more likely than not to be realized. For interim reporting purposes, the Company records income taxes based on the expected annual effective income tax rate, taking into consideration global forecasted tax results and the effect of discrete tax events. The Company makes certain estimates and judgments in the calculation for the provision for income taxes, in the resulting tax liabilities, and in the recoverability of deferred tax assets. All deferred tax assets are reported as noncurrent in the Condensed Consolidated Balance Sheets.

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Inventories

Inventories are stated at the lower of cost or net realizable value. The components of inventories are as follows (amounts in thousands):

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	June 30, 2019				March 31, 2019
Raw materials and supplies	$	104,160			$	97,119
Work in process	83,856				71,374
Finished goods	86,766				88,175
Subtotal	274,782				256,668
Inventory reserves	(18,642		)		(15,539		)
Inventories, net	$	256,140			$	241,129

 

Recently Issued Accounting Pronouncements

There are currently no accounting standards that have been issued that will have a significant impact on the Company’s financial position, results of operations or cash flows upon adoption.

Note 2. Debt

A summary of debt is as follows (amounts in thousands):

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	June 30, 2019				March 31, 2019
TOKIN Term Loan Facility (1)	284,623				276,808
Customer Advances (2)	20,906				11,270
Other (3)	6,567				6,393
Total debt	312,096				294,471
Current maturities	(29,225		)		(28,430		)
Total long-term debt	$	282,871			$	266,041

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⁽¹⁾ Amount shown is net of discount, bank issuance costs, and other indirect issuance costs of $8.9 million and $8.7 million at June 30, 2019 and March 31, 2019, respectively.

⁽²⁾ Amount shown is net of discount of $5.0 million and $2.1 million at June 30, 2019, and March 31, 2019, respectively.

⁽³⁾ Amounts are shown net of discounts of $0.6 million at June 30, 2019 and March 31, 2019, respectively.

The line item “Interest expense” on the Condensed Consolidated Statements of Operations for the three months ended June 30, 2019 and 2018, consists of the following (amounts in thousands):

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	Three Months Ended June 30,
	2019				2018
Contractual interest expense	$	1,740			$	6,845
Capitalized interest	(105		)		(64		)
Amortization of debt issuance costs	127				116
Amortization of debt (premium) discount	767				98
Imputed interest on acquisition-related obligations	—				15
Interest expense on finance leases	16				26
Total interest expense	$	2,545			$	7,036

TOKIN Term Loan Facility

On October 29, 2018, the Company entered into a JPY 33.0 billion Term Loan Agreement (the “TOKIN Term Loan Facility”) by and among TOKIN Corporation (“TOKIN”), the lenders party thereto (the “Lenders”) and Sumitomo Mitsui Trust Bank, Limited in its capacity as agent (the “Agent”), arranger and Lender. Funding for the TOKIN Term Loan Facility occurred on November 7, 2018. The proceeds, which were net of an arrangement fee withheld from the funding amount, were JPY 32.1 billion, or approximately $283.9 million using the exchange rate as of November 7, 2018. Net of the arrangement fee, bank issuance costs, and other indirect issuance costs, the Company's net proceeds from the TOKIN Term Loan Facility was $281.8 million.

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The proceeds from the TOKIN Term Loan Facility were used by TOKIN to make intercompany loans (the “Intercompany Loans”) to the Company. The proceeds of the Intercompany Loans, along with other cash on hand, were used by the Company to prepay in full the outstanding amounts under the Company's previous term loan of $323.4 million and a prepayment premium of 1.0%, or $3.2 million.

The TOKIN Term Loan Facility consists of (i) a JPY 16.5 billion (approximately $146.0 million using the exchange rate as of November 7, 2018) Term Loan A tranche (the “Term Loan A”) and (ii) a JPY 16.5 billion (approximately $146.0 million using the exchange rate as of November 7, 2018) Term Loan B tranche (the “Term Loan B” and, together with the Term Loan A, collectively, the “Term Loans”). Principal payments under Term Loan A are required semi-annually, in the amount of JPY 1.4 billion (approximately $12.8 million using the exchange rate as of June 30, 2019), while the principal of Term Loan B is due in one payment at maturity. At each reporting period, the carrying value of the loan is translated from Japanese Yen to U.S. Dollars using the spot exchange rate as of the end of the reporting period.

Interest payments are due semi-annually on the Term Loans, with the interest rate based on a margin over the six-month Japanese TIBOR. The applicable margin for Term Loan A is 2.00% and for Term Loan B is 2.25%. Japanese TIBOR at June 30, 2019 was 0.13%. Interest payable related to the TOKIN Term Loan Facility included in the line item “Accrued expenses” on the Condensed Consolidated Balance Sheets was $1.7 million as of June 30, 2019.

The Term Loans mature on September 30, 2024. KEMET and certain subsidiaries of TOKIN provided guarantees of the obligations under the Term Loans, which also are secured by certain assets, properties and equity interests of TOKIN and its material subsidiaries. The Term Loans contain customary covenants applicable to both the Company and to TOKIN, including maintenance of a consolidated leverage ratio, the absence of two consecutive years of consolidated operating losses and the maintenance of certain required levels of consolidated net assets. The TOKIN Term Loan Facility agreement also contains customary events of default. The Company may prepay the Term Loans at any time, subject to certain notice requirements and reimbursement of loan breakage costs.

Revolving Line of Credit

In connection with the closing of the TOKIN Term Loan Facility on October 29, 2018, the Company entered into Amendment No. 10 to the Loan and Security Agreement, Waiver and Consent (the “Revolver Amendment”), by and among KEMET, KEMET Electronics Corporation (“KEC”), the other borrowers named therein, the financial institutions party thereto as lenders and Bank of America, N.A., a national banking association, as agent for the lenders. The Revolver Amendment provides the Company with, among other things, increased flexibility for certain restricted payments (including dividends), and also released certain pledges that allowed the Company to obtain the TOKIN Term Loan Facility in order to pay in full the Company's prior term loan. The revolving line of credit has a facility amount of up to $75.0 million, which is based on factors including outstanding eligible accounts receivable, inventory, and equipment collateral. There were no borrowings under the revolving line of credit during the quarter ended June 30, 2019, and the Company’s available borrowing capacity under the Loan and Security Agreement was$62.5 million as of June 30, 2019.

Customer Advances

In September, November, and February of fiscal year 2019, the Company entered into three agreements with different customers (the “Customers”) pursuant to which the Customers agreed to make advances (collectively, the “Advances”) to the Company in an aggregate amount of up to $72.0 million (collectively, the “Customer Capacity Agreements”). The Company is using these Advances to fund the purchase of production equipment and to make other investments and improvements in its business and operations (the “Investments”) to increase overall capacity to produce various electronic components of the type and part as may be sold by the Company to the Customers from time to time. The Company retains all rights to the production equipment purchased with the funds from the Advances. The Advances from the Customers are being made in quarterly installments (“Installments”) over an expected period of 18 to 24 months from the effective date of the Customer Capacity Agreements.

The Advances will be repaid beginning on the date that production from the Investments is sufficient to meet the Company's obligations under the agreements with the Customers. Repayments will be made on a quarterly basis as determined by calculations that generally consider the number of components purchased by the Customers during the quarter. Repayments based on the calculations will continue until either the Advances are repaid in full, or December 31, 2038 for all three Customers. The Company has a quarterly repayment cap in the agreement with each of the Customers and is not required to make any quarterly repayments to the Customers that in the aggregate exceeds $1.8 million. If the Customers do not purchase a number of components that would require full repayment of the Advances by December 31, 2038, then the Advances shall be deemed repaid in full. Additionally, if the Customers do not purchase a number of components that would require a payment on the Advances for a period of 16 consecutive quarters, the Advances shall be deemed repaid in full.

As of June 30, 2019, the Company has received a total of $26.0 million in Advances from these Customers. Since the debt is non-interest bearing, the Company has recorded debt discounts on the Advances. These discounts will be amortized

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over the expected life of the Advances through interest expense. During the three months ended June 30, 2019, the Company had $7.7 million in capital expenditures related to the Customer Capacity Agreements.

As of June 30, 2019, the Company had $2.6 million in cash that was restricted to be used to fund these Investments. Restricted cash is recorded within “Prepaid expenses and other current assets” in the Condensed Consolidated Balance Sheets.

Other Debt

In January 2017, KEMET Electronics Portugal, S.A. (“KEP”), a wholly owned subsidiary, entered into a program with the Portuguese government where KEP is eligible to receive interest free loans if purchases of fixed assets meet certain approved terms within the program. In January 2017, KEP received the first part of an interest free loan in the amount of EUR 2.2 million (or $2.5 million). In July 2017, KEP received the second part of the loan in the amount of EUR 0.3 million (or $0.3 million). The loan has a maturity date of February 1, 2025. The loan will be repaid through semi-annual payments on August 1 and February 1 of each year beginning on August 1, 2019. The repayments will be in the amount of EUR 0.2 million (or $0.2 million).

    In February 2019, KEP received a second interest free loan from the Portuguese government in the amount of EUR 0.9 million, (or $1.1 million). The loan has a maturity date of September 1, 2026 and will be repaid through semi-annual payments on March 1 and September 1 of each year beginning on March 1, 2021. The repayments will be in the amount of EUR 0.1 million (or $0.1 million).

Since the KEP debt is non-interest bearing, the Company has recorded debt discounts on these loans. These discounts are being amortized over the life of the loans through interest expense. If certain conditions are met by KEP, such as increased headcount at its facility in Evora, Portugal, increased revenue, and increased gross value added, a portion of these loans could be forgiven.

TOKIN has a short term borrowing pursuant to an agreement with The 77 Bank Limited, located in Japan, in the amount of 350.0 million Yen (or $3.2 million), at an interest rate of 0.53% (Japanese TIBOR plus 40 basis points). The loan was originally due in September 2018 and was extended to September 2019. The loan agreement automatically renews for successive one year periods if both parties choose not to terminate or modify it.

Note 3. Goodwill and Intangible Assets

The following table highlights the Company’s intangible assets (amounts in thousands):

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		June 30, 2019												March 31, 2019
		Carrying Amount				Accumulated Amortization				Net Amount				Carrying Amount				Accumulated Amortization				Net Amount
Indefinite Lived Intangible Assets:
Trademarks		$	15,375			$	—			$	15,375			$	15,151			$	—			$	15,151
Amortizing Intangibles:
Patents (10 - 18 years)		26,662				(12,401		)		14,261				26,662				(12,046		)		14,616
Customer relationships (10 - 21 years)		38,714				(14,902		)		23,812				37,850				(13,868		)		23,982
Other		215				(215		)		—				214				(214		)		—
Total amortizing intangibles		65,591				(27,518		)		38,073				64,726				(26,128		)		38,598
Total intangible assets		$	80,966			$	(27,518	)		$	53,448			$	79,877			$	(26,128	)		$	53,749

For each of the three months ended June 30, 2019 and 2018, amortization related to intangibles was $1.1 million, consisting of amortization related to patents of $0.3 million and amortization related to customer relationships of $0.8 million.

The weighted-average useful life for patents was 15.8 years as of June 30, 2019 and March 31, 2019, respectively, and 12.3 years for customer relationships as of June 30, 2019 and March 31, 2019, respectively. Estimated amortization of intangible assets for each of the next five fiscal years is $4.5 million, and thereafter, amortization will total $15.7 million. Estimated amortization of patents for each of the next five fiscal years is $1.4 million, and thereafter, amortization will total $7.2 million. Estimated amortization of customer relationships for each of the next five fiscal years is $3.1 million, and thereafter, amortization will total $8.5 million.

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Note 4. Restructuring Charges

The Company has implemented restructuring plans, which include programs to increase competitiveness by removing excess capacity, relocating production to lower cost locations, and eliminating unnecessary costs throughout the Company. Significant restructuring plans in progress or recently completed as of June 30, 2019 are summarized below (amounts in thousands):

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		Total expected to be incurred					Incurred during quarter ended June 30, 2019					Cumulative incurred to date
Restructuring Plan	Segment	Personnel Reduction Costs		Relocation & Exit Costs			Personnel Reduction Costs		Relocation & Exit Costs			Personnel Reduction Costs		Relocation & Exit Costs
Tantalum powder facility relocation (1)	Solid Capacitors	897		2,098			448		(552	)		448		2,805
Axial electrolytic production relocation from Granna to Evora	Film and Electrolytic	673		3,964			673		1,308			673		3,603
Reorganization of MnO2 product line	Solid Capacitors	3,128		—			43		—			1,628		—

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⁽¹⁾ The current quarter credit for manufacturing relocation and exit costs is due to the recovery of costs related to the sale of tantalum that has been reclaimed (“tantalum reclaim”) as part of the plant exit activities. Tantalum reclaim in future periods is expected to further reduce the cumulative incurred costs.

A summary of the expenses aggregated in the Condensed Consolidated Statements of Operations line item “Restructuring charges” in the three months ended June 30, 2019 and 2018, is as follows (amounts in thousands):

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	Three Months Ended June 30,
	2019				2018
Personnel reduction costs	$	1,229			$	(84	)
Relocation and exit costs	979				(12		)
Restructuring charges	$	2,208			$	(96	)

Three Months Ended June 30, 2019

The Company incurred $2.2 million in restructuring charges in the three months ended June 30, 2019 comprised of $1.2 million in personnel reduction costs and $1.0 million in manufacturing relocation and exit costs.

The personnel reduction costs of $1.2 million were primarily due to $0.7 million in costs in the Film and Electrolytic segment related to severance charges resulting from the closing of the Granna, Sweden manufacturing plant as axial electrolytic production is being moved to the plant in Evora, Portugal and $0.5 million in costs in the Solid Capacitors segment related to severance charges resulting from the closing of the tantalum powder facility in Carson City, Nevada as tantalum powder production is moving to the plant in Matamoros, Mexico.

The manufacturing relocation and exit costs of $1.0 million primarily related to $1.3 million in costs resulting from the relocation of axial electrolytic production equipment from the Company's plant in Granna, Sweden to its plant in Evora, Portugal. Manufacturing relocation and exit costs were benefited by a $0.6 million credit from tantalum reclaim.

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Reconciliation of Restructuring Liability

A reconciliation of the beginning and ending liability balances for restructuring charges included in the line items “Accrued expenses” and “Other non-current obligations” on the Condensed Consolidated Balance Sheets for the three months ended June 30, 2019 and 2018 is as follows (amounts in thousands):

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	Three Months Ended June 30, 2019								Three Months Ended June 30, 2018
	Personnel  Reductions				Manufacturing  Relocations				Personnel  Reductions				Manufacturing  Relocations
Beginning of period	$	1,865			$	316			$	9,629			$	330
Costs charged to expense	1,229				979				(84		)		(12		)
Costs paid or settled	(1,315		)		(979		)		(5,131		)		12
Change in foreign exchange	10				9				(244		)		(13		)
End of period	$	1,789			$	325			$	4,170			$	317

Note 5. Comprehensive Income (Loss) and Accumulated Other Comprehensive Income

Changes in AOCI for the three months ended June 30, 2019 and 2018 include the following components (amounts in thousands):

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	Foreign  Currency Translation, net of Tax (1)				Post-Retirement  Benefit Plan Adjustments, net of Tax				Defined  Benefit Pension  Plans,  net of Tax (2)				Ownership Share of Equity Method  Investees’ Other  Comprehensive  Income (Loss), net of Tax				Cash Flow Hedges, net of Tax				Excluded Component of Fair Value Hedges, net of Tax				Net Accumulated  Other  Comprehensive  Income (Loss), net of Tax
Balance at March 31, 2019	$	(14,350	)		$	793			$	(15,758	)		$	274			$	566			$	(2,249	)		$	(30,724	)
Other comprehensive income (loss) before reclassifications (3) (4)	5,834				—				—				—				(1,704		)		(346		)		3,784
Amounts reclassified out of AOCI	(2,655		)		(37		)		164				—				(4,294		)		1,638				(5,184		)
Other comprehensive income (loss)	3,179				(37		)		164				—				(5,998		)		1,292				(1,400		)
Balance at June 30, 2019	$	(11,171	)		$	756			$	(15,594	)		$	274			$	(5,432	)		$	(957	)		$	(32,124	)

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	Foreign  Currency Translation, net of Tax (1)				Post-Retirement  Benefit Plan Adjustments, net of Tax				Defined  Benefit Pension  Plans,  net of Tax (2)				Ownership Share of Equity Method  Investees’ Other  Comprehensive  Income (Loss), net of Tax				Cash Flow Hedges, net of Tax				Excluded Component of Fair Value Hedges, net of Tax				Net Accumulated  Other  Comprehensive  Income (Loss), net of Tax
Balance at March 31, 2018	$	9,715			$	879			$	(14,831	)		$	285			$	1,154			$	—			$	(2,798	)
Other comprehensive income (loss) before reclassifications	(24,203		)		—				—				(11		)		(3,795		)		—				(28,009		)
Amounts reclassified out of AOCI	—